Distressed Private Equity: It’s cheaper if it’s on fire

Many are familiar with the story of Bear Stearns’ monumental stock collapse and the sale of the investment bank to JP Morgan in 2008 at $2 per share – almost 1% of the original value of the year before. The notion of purchasing a competitor at such a discount is borderline unfathomable. Unfortunately, the takeover created such a substantial regulatory and legal liability over time that led Jamie Dimon to declare his regret of the acquisition. But is there a way to acquire a failing company cheaply and make a profit: can we buy extremely low and still sell high?